- Silver extended its weekly gains, up 5.17% so far.
- US inflation reached levels last seen in August 1982, topping 7% for the second straight month.
- Money market futures have priced in an 80 percent chance of a 50 basis point rise at the Fed’s March meeting.
- XAG/USD is neutrally biased but bulls are preparing to attack the 200-DMA at $24.20.
Silver (XAG/USD) extends its rally to five straight days after a hot US inflation report touched levels not seen since the 1980s. At the time of writing, XAG/USD is trading at $23.70.
An hour before US cash markets open, the Bureau of Labor Statistics (BLS) said the consumer price index (CPI), the indicator of inflation in the US, hit 7.5% yoy in January, up from an estimated 7.3 % by analysts. So-called core CPI, which excludes volatile items like groceries and energy, rose to 6%, ahead of the estimated 5.9%.
According to analysts at RBC, they noted that “near-term inflation is being driven by higher house rents and vehicle prices”. He also added that inflationary pressures are increasing “as the majority of the consumer basket see inflation growth at +2%”.
Following the release of the data, market participants fully priced in a 25 basis point hike in the Federal Funds Rate (FFR) by the Federal Reserve. However, there is an 80 percent chance of a 50 basis point hike as reported by the CME FEDWATCH tool at press time on February 10, 2022.
Source: CME Group
Meanwhile, the US Dollar Index, a measure of the dollar’s value against a basket of peers, is down 0.27% and currently stands at 95.26. The US 10-year Treasury yield is up eight basis points to 2.024%, which would normally discourage the white metal from pushing higher prices but appears to be being ignored by investors.
Alongside the inflation report, the US Economic List showed that initial jobless claims rose to 223k for the week ended February 5, better than analysts’ forecast of 230k, while ongoing jobless claims were flat at 1621k from the previous week’s revision.
XAG/USD Price Prediction: Technical Outlook
XAG/USD is neutrally sloping up as indicated by the daily charts. Silver’s price action on Thursday left the 100-day moving average (DMA) as support at $23.21 and broke the daily high resistance level from Jan 3 at $23.40, which is now support, following the US CPI release would.
Once those levels are cleared, XAG/USD’s next resistance would be a 10-month-old downtrend line which resides around $24.20, but first the XAG/USD bulls need to break the psychological figure of $24.00. If the $24.00-$20 region gives way, there is nothing standing in the way to $25.00.
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